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Singapore’s Temasek increases holdings in Chinese stocks amid global divestment trend

Singapore’s Temasek Holdings defies global divestment trend by increasing Chinese equity investments in Q2.

While many investors reduce exposure, Temasek raised stakes in JD.com by 110%, BeiGene by 1%, countering bearish market sentiment and holding positions in other firms like Alibaba and Yum China Holdings.

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SINGAPORE: Singapore’s sovereign wealth fund, Temasek Holdings, has defied the global trend of divestment from Chinese equities by boosting its investments in the second quarter.

In contrast to many international investors reducing their exposure due to growing pessimism and geopolitical risks, Temasek raised its holdings in Chinese companies, according South China Morning Post.

Temasek increased its stake in JD.com by 110% and in BeiGene by 1%, while shedding most of its holdings in Pinduoduo.

Temasek’s optimistic stance stands out as it maintains positions in several other Chinese firms, including Alibaba and Yum China Holdings. This move counters the broader market’s bearish outlook on Chinese stocks during a sluggish post-Covid-19 recovery.

Meanwhile, Saudi Arabia’s Public Investment Fund (PIF) also diverged from the global trend by increasing its stake in Alibaba Group Holding by 41%, expanding its equity portfolio despite the prevailing uncertainty.

These moves by sovereign wealth funds stand in contrast to well-known investors like Scion Asset Management and Tiger Global, which have exited or reduced their positions in Chinese equities.

While Temasek’s strategy seems to focus on companies with access to large domestic markets, it is essential to note that the broader sentiment towards Chinese equities is influenced by factors like market performance, geopolitical tensions, and Beijing’s policy responses.

Despite the market volatility and uncertainties, both Temasek and PIF appear to be taking a unique approach to their investment strategies in the Chinese equity market.

It is worth mentioning that both Temasek and PIF recorded significant losses in the past year due to global market downturns.

The Saudi and Singapore sovereign funds recorded steep losses last year amid a global market downturn.

Temasek lost US$5.2 billion in the 12 months to March 2023, its worst showing since 2016.

The PIF incurred a loss of US$11 billion on investment activities last year, versus a US$19 billion gain in 2021.

Their current investment decisions signal their confidence in selected Chinese companies, even as other investors show caution and divestment.

“We need to apply a geopolitical lens to all our investments.

“For example, we won’t invest in areas that are in the crosshairs of US-China tensions. We’ll prefer to invest in companies that have access to large domestic markets,” Rohit Sipahimalani, chief investment officer at Temasek said last month.

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TH seems to do 2 things very well:
1) buy high, sell low
2) buy low, sell even lower.

In the case of China, perhaps the criteria for our sovereign funds to invest in Chinese companies is not the tangible returns. It may be the intangible returns in terms “guanxi” for the long haul. If everyone in the region is making efforts to be pally pally with China, all the more SG need to demonstrate likewise. This is the reality of things going forward for the remaining 21st century.

Saudi can afford to lose as they have oil. Singapore has no resources only people. The China market investment based on high domestic demand is a mistake at this time. Should only be looked at next year in June or July. Why does TH always enter markets before allowing it to slide downwards a few times and resting?

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